Lateral collinearity and misleading results in variance-based SEM: An illustration and recommendations

Variance-based structural equation modeling is extensively used in information systems research, and many related findings may have been distorted by hidden collinearity. This is a problem that may extend to multivariate analyses, in general, in the field of information systems as well as in many other fields. In multivariate analyses, collinearity is usually assessed as a predictor-predictor relationship phenomenon, where two or more predictors are checked for redundancy. This type of assessment addresses vertical, or "classic", collinearity. However, another type of collinearity may also exist, here called "lateral" collinearity. It refers to predictor-criterion collinearity. Lateral collinearity problems are exemplified based on an illustrative variance-based structural equation modeling analysis. The analysis employs WarpPLS 2.0, with the results double-checked with other statistical analysis software tools. It is shown that standard validity and reliability tests do not properly capture lateral collinearity. A new approach for the assessment of both vertical and lateral collinearity in variance-based structural equation modeling is proposed and demonstrated in the context of the illustrative analysis.